It is estimated that right now around £255 billion is owed to small businesses by customers who have yet to pay them. According to SME Insider, the small business news service, one in five is owed more than £25k, one in 10 more than £100k and a staggering 43,000 SMEs are owed in excess of £1 million.
Not only does this sad state of affairs damage the national economy but it presents huge problems and challenges for the small businesses that are owed so much. Late payments cause cash flow problems and drain business resources too, in the form of working hours spent chasing them, having to negotiate late payments with their own suppliers, potentially incurring costs through, say, overdraft facilities or credit cards, and having to go, cap in hand, to the bank.
Although you may never combat the issue of late payment entirely, there are measures you can take to minimise it and the effects it can have.
How to overcome the problem of late payments
Consider the following steps to improve your invoicing and debt collection processes to mitigate the problems caused by late payments:
Check who’s to blame:Before you remonstrate with your client, check that you haven’t inadvertently caused the hold-up in the payment process yourself. Have you included all the required information and references on the invoice? Some suppliers won’t pay unless you include their purchase order number or a specific reference number. And they are unlikely to let you know in a hurry if you haven’t complied with their requirements.
Make it easy for them to pay you:Take a loose look at your invoicing policy. Do your invoices contain all the details customers will need to make the payment – your references, your bank details etc? Could you entice them to pay promptly with a discount or look at implementing Direct Debit or Standing Order so that your bill is paid automatically each time?
Invest in online accounting services:Online accounting services solve many issues concerning billing schedules. By integrating with your bank account, records will always be up-to-date and will quickly flag a payment issue, allowing you to act swiftly on overdue accounts. Online accounting helps you feel in control of your accounts and finances.
Become an invoicing wizard:Invoice promptly on the delivery of your service or product and then make contact with your customer before the payment due date to check there is not going to be a hold-up.
Turn debt collector:Chase up unpaid invoices as soon as they become overdue. Make a phone call first to check if there’s a problem with the invoice (see point 1). If there’s no issue, and payment remains outstanding, first write a gentle reminder letter, followed by another call, then send a final reminder. With online accounting systems, such as Xero, you have the facility to send regular reminders. Xero also has many add-on partners offering software services to aid cash flow management, such as winner of the Add-on Partner of the Year Award at this year’s Xerocon conference, Chaser, with its automatic invoice-chasing. Your last resort will be legal action to recover the debt.
Ensuring strong cash flow
Online accounting and invoicing can help get you paid faster and reduce debtor days, which in turn ensure a strong cash flow in your business. By working closely with your accountant, you will also benefit from having potential problems flagged up and dealt with before they become cash flow bottlenecks.
If you need our expert accountants’ advice on overcoming the problem of late payment email Jon now.
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The process is easy: simply write a letter to your creditor explaining why you paid late.Ask them to forgive the late payment and assure them it won't happen again. If they do agree to forgive the late payment, your creditor should adjust your credit report accordingly.
Responding to a late payment email involves addressing the issue promptly and professionally. Start by apologizing for the delay and acknowledging any inconvenience caused. Be transparent about the reasons for the late payment, without oversharing personal details.
Legal action, such as engaging collection agencies or lawyers, should be a last resort, as this can be a costly option for your business. Instead, try sending a demand letter first to resolve the late payment. Best practices suggest sending a demand letter 30 days after the payment due date.
The circ*mstances drained my savings and I was forced to miss a payment because of it. I have always prided myself in paying on time, and I have taken steps to put away more money in my savings account to guard against other unforeseen occurrences like this.
1 Set clear expectations. The first step to avoid payment issues is to set clear expectations with your clients before you start working with them. ...
If you find an incorrect or old late-payment one of your credit reports, you can file a dispute with the credit bureau that issues the report. You can also dispute the mistake with the creditor that sent the information to the bureau, such as the lender, credit card issuer or collections agency.
Writing an “Apologize For a Late Payment” letter is a professional and effective way to express regret for the delay in payment. This letter should include a sincere apology for the delay, a brief explanation of the reason for the delay, and a clear timeline for when the payment will be made.
It might take three to five months of strong payment history to get the score to turn around, Jackson says. Missed payments will stay on your credit record for seven years from the date of activity, "but that doesn't mean the impact on your credit score is there for the duration of the seven years," McClary says.
Late payments can't be removed from a credit report unless they were reported in error. So if a late payment is correctly reported, no one can remove it from a credit report. What is a goodwill letter? A goodwill letter is a note to a creditor asking to remove a negative item from credit reports.
How to get a late fee waived in 3 steps. You can request late fee forgiveness by verifying the late fee hit your account, calling customer service to explain the situation and agreeing to pay your balance.
Introduction: My name is Kimberely Baumbach CPA, I am a gorgeous, bright, charming, encouraging, zealous, lively, good person who loves writing and wants to share my knowledge and understanding with you.
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